Gold prices (XAU/USD) are maintaining a bullish trajectory, reaching a fresh all-time high in the last hour of the European session on Monday. The precious metal briefly touched the $2,896-$2,897 mark, driven by persistent economic concerns and trade tensions.
The primary catalyst for the surge remains fears over the potential economic fallout from U.S. President Donald Trump’s trade policies. His decision to introduce new tariffs and escalate tensions with China has amplified demand for gold, traditionally viewed as a safe haven. Additionally, worries that Trump’s protectionist stance could reignite inflation in the U.S. are adding to the precious metal’s appeal as a hedge against rising prices.
Despite a stronger U.S. Dollar (USD) attracting some buyers, driven by speculation that the Federal Reserve (Fed) may maintain its hawkish stance amid a resilient U.S. labor market and ongoing inflationary concerns, gold’s non-yielding nature continues to boost its demand. However, with overbought conditions on the daily chart, traders may hesitate to place additional bullish bets on gold in the short term. Still, the overall market sentiment suggests that gold’s path of least resistance remains upward.
Trade War Fears Continue to Propel Gold Prices
The gold price rally was further supported by President Trump’s announcement on Sunday that he would impose new 25% tariffs on all steel and aluminum imports into the U.S. This announcement also included plans to implement reciprocal tariffs on all countries, further adding to economic uncertainties and boosting demand for gold.
On the geopolitical front, Russian Deputy Foreign Minister Sergey Galuzin stated that there were no satisfactory proposals to begin negotiations on Ukraine, dismissing Western and Ukrainian statements as mere buzz-building. Meanwhile, U.S. Vice President JD Vance is expected to travel to Germany this week to provide details of the U.S. proposal concerning the issue.
Market participants remain concerned that Trump’s trade policies could lead to higher inflation in the U.S., a scenario that would likely strengthen gold’s role as a hedge against inflation. While the upbeat U.S. Nonfarm Payrolls (NFP) report released on Friday highlighted a resilient labor market, it also suggests that the Fed might not ease its stance any time soon, limiting the upside potential for gold.
U.S. Jobs Data and Fed Commentary Impact Market Sentiment
The U.S. economy added 143,000 jobs in January, falling short of the anticipated 170,000, and lower than the revised 307,000 jobs from the previous month. However, the U.S. unemployment rate unexpectedly dipped to 4.0%, a sign of continued labor market strength.
Despite the mixed jobs report, comments from Federal Reserve officials have added to market uncertainty. Minneapolis Fed President Neel Kashkari indicated that he would support further rate cuts if inflation remains manageable and the labor market stays strong. Chicago Fed President Austan Goolsbee warned that inconsistent U.S. government policies are creating economic uncertainty, making it difficult for the Fed to forecast inflation and economic conditions accurately.
Fed Board of Governors member Adriana Kugler emphasized that while U.S. growth remains solid, progress toward the Fed’s 2% inflation target has been uneven. This ongoing inflationary pressure supports gold’s value as a hedge.
Gold’s Technical Outlook
From a technical perspective, the Relative Strength Index (RSI) indicates that gold may be overbought, signaling a potential pause in the upward momentum. Traders may choose to wait for a period of consolidation or a slight pullback before positioning for further gains. The $2,886-$2,887 range, which marks the recent all-time high, is expected to present some resistance ahead of the $2,900 mark.
On the downside, any pullback to the $2,855-$2,854 support zone could offer a buying opportunity, with further downside risks limited near the $2,834 region. A more significant corrective move below this support could lead to further declines toward the $2,815-$2,814 range, eventually testing the psychological $2,800 level.
Looking Ahead: Key Events to Watch
Traders are now turning their attention to upcoming economic data, including U.S. consumer inflation figures and Fed Chair Jerome Powell’s semi-annual congressional testimony, which are likely to influence gold’s next directional move. With the broader economic backdrop favoring gold as a safe-haven asset, any further escalation in trade tensions or inflationary fears could continue to drive gold prices higher.
Conclusion
In conclusion, gold prices are maintaining their bullish trend, bolstered by growing concerns over U.S. trade policies, inflationary pressures, and global economic instability. Despite a stronger U.S. Dollar and some signs of an overbought market, the ongoing geopolitical tensions and the precious metal’s status as a hedge against inflation suggest that gold’s upward trajectory is likely to persist.
As traders await key economic data and Fed commentary, gold may experience short-term consolidation, but the broader market sentiment continues to favor its safe-haven appeal. With trade uncertainties, inflationary fears, and the potential for further policy actions by the Federal Reserve, gold remains a strong contender for investors seeking protection from economic volatility. As such, gold prices could continue to climb, potentially testing new record highs in the coming weeks.